Mulcahy and Panchal and Anor

[2015] FamCA 882

FAMILY COURT OF AUSTRALIA

MULCAHY & PANCHAL AND ANOR [2015] FamCA 882

FAMILY LAW – Single expert witness fees – Where order was made for each of the three parties to contribute equally to the payment of expenses but that order became impracticable – Whether (and if so how) the Court should alter its orders to make one party pay the whole of the sum on the basis that the trial would otherwise not proceed – Application for alteration of orders refused.

Family Law Act 1975 (Cth)

Kyriakos v Kyriakos[2013] FamCAFC 22

APPLICANT: Ms Mulcahy

1^ST RESPONDENT: Mr Panchal

2^ND RESPONDENT: B Pty Ltd

FILE NUMBER: MLC 4322 of 2013

DATE DELIVERED: 21 October 2015

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 19 October 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Robinson

SOLICITOR FOR THE APPLICANT: Clancy & Triado

THE 1^ST RESPONDENT: No Appearance

COUNSEL FOR THE 2^ND RESPONDENT Mr Macfarlane

SOLICITOR FOR THE 3^RD RESPONDENT: Carew Counsel Pty Ltd

Orders

1. That paragraph 7 of the proposed orders in the application in a case filed 14 September 2015 is dismissed.

2. That paragraphs 8 and 9 of the said application in a case together with paragraphs 2, 3 and 4 of the response to the application in a case (it being filed on 5 October 2015) are all adjourned to the final hearing to commence on 1 February 2016 (but with all parties having liberty to apply to a registrar for the reinstatement and determination of those matters).

3. That paragraph 10 of the said application in a case and paragraph 5 of the response thereto shall be determined by written submission to be filed by no later than 4.00pm on 30 October 2015 and any response thereto to be filed and served by 4.00pm on 6 November 2015 and such matter shall be determined in chambers.

4. That paragraphs 3 to 6 of the proposed orders in the said application in a case filed 14 September 2015 are otherwise adjourned to be consolidated at the final hearing.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

IT IS NOTED that publication of this judgment by this Court under the pseudonym <pseudonym> has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 4322  of 2013

MS MULCAHY

Applicant

And

MR PANCHAL

1^st Respondent

And

B PTY LTD

2^nd Respondent

REASONS FOR JUDGMENT

1. These reasons concern the question of who should be responsible for the payment of the expenses of a court-appointed single expert witness. The simplicity of that statement hides the dilemma.

2. The nature of the substantive dispute remains unclear notwithstanding it has been set down for final hearing in early 2016. At best, the position of a number of parties is fluid.

3. I conducted a directions hearing a week ago for the purposes of setting the financial dispute down for final hearing but more questions arose about not only the nature of the dispute but also who were the relevant parties. That uncertainty necessitated an adjournment and now, more individuals have been named as parties although not necessarily yet served with the documents.

4. It is not suggested that the newly named parties should be responsible for the payment of the expert’s fees (although it may be that they might wish to contribute in the interests of obtaining an expedient result to the litigation). Indeed, whether or not these people have been properly joined remains to be decided.

5. In short compass, the applicant and the first respondent lived together in a de facto relationship which has now broken down. Consequently, the applicant sought orders for the division of property. The first respondent has not considered it important enough to participate of late.

6. Doing the best I can, the contentious facts seem to be that the first respondent conducted a business through a corporate entity of which he was the sole shareholder. There were 100 shares and he transferred all of them. 55 of those shares are now held by the third, fourth, fifth and sixth respondents in varying number but the remaining 45 are held (as counsel for the second respondent described it) on trust by J Pty Ltd (the third respondent) in escrow for and on behalf of K Pty Ltd as trustee for the K Family Trust.

7. The nature of the escrow was described as being that, if a Commonwealth Bank loan was refinanced (by the second respondent) or a period of 5 years had elapsed, the trust would cease and the 45 shares would be transferred to K Pty Ltd. This entity is controlled by the applicant as a trustee company but the first respondent is the sole beneficiary. I am uncertain why the Court cannot alter that position but it was not a matter argued before me.

8. The second respondent is said to have purchased the business conducted by the corporate entity controlled by the first respondent’s entity. There is another complicating difficulty because of the liquidation of the entity of the first respondent. The liquidator has not been sought to be joined.

9. In the initiating application, the applicant had sought an order under s 106B of the Act to set aside the whole transaction but that was subsequently abandoned. In the amended initiating application filed on 15 October 2015, orders of that nature were not sought but counsel for the applicant said that if it was necessary to do so, that application would again be pressed. Time is running out.

10. What the shareholders of the second respondent apparently want is to acquire the 45 shares from K Pty Ltd which I understand is controlled by the applicant. And there, we find the real dispute regardless of jurisdiction, power and so forth. The respondents other than the second are said to have obtained the business (whatever it was) for no consideration.

11. The third respondent (and possibly the other respondents) say they will pay to the applicant the value of the 45 shares at the relevant amount as determined by the expert. That must however be subject to any challenges to her report where errors may said to have become apparent.

12. The difficulty is that the valuation exercise has been halted because of the dispute about payment of the expert. That comes about because the applicant says that she has no money to pay. That claim is disputed by the third respondent.

13. The clouds even there do not easily part to portray what has happened.

14. In May 2014 at a registrar hearing with counsel attending for the “proposed Third Party” (the second respondent), orders were made for the applicant (who was incorrectly described as “the wife”) to file and serve an application to effectively join the now second respondent. That action was never undertaken.

15. Quite mistakenly, the Court proceeded thereafter on the basis that the second respondent had been joined. Indeed, orders named the company as such.

16. On 1 July 2014, notwithstanding the reasons noted the May order requiring things to be done, an order was made directing the parties including the second respondent to give instructions to the named single expert witness and provide her with documents. The order then said:

    The costs of (the expert) report to be shared equally between all parties.

17. In February 2015, still without the joinder being done, further orders were made by a Judge directing the third party to produce documents to the expert and requiring an explanation in affidavit form if they could not do so. A solicitor had appeared for the second respondent in that hearing and not raised the joinder issue so there was no prejudice to it. Just how all this came to occur remains unclear.

18. It was only when the matter came before me for trial directions that the joinder issue was sorted out but that led to issues of joining other parties including the liquidator.

19. Thus, there is extant, an order for the applicant to pay one third of the expert’s fees, the first respondent pay one third and, the second respondent pay one third.  The second respondent is willing and ready to so pay. The first respondent is not taking part. The applicant says she cannot pay anything and if the order of July 2014 remains, the case will not be ready for trial.

20. The applicant says that she has no money yet the second respondent pointed to the applicant having acquired a German motor vehicle on finance. In her July Judgment, Macmillan J said of that:

    The wife also deposed that in 2013, by agreement with the  husband, she purchased a 2013 [German] motor vehicle and borrowed $78,000 from … Finance in order to do so.  The vehicle is registered in the wife’s sole name as is the finance. The wife deposes that the husband increased his monthly payments to her from $9,000 to $10,000 per month to cover the [German motor vehicle] loan repayments, which she says are $1,355 per month.  According to the wife the husband made the payments for a few months after purchase of the [German motor vehicle] although those payments were irregular, were sometimes $9,500 or $9,000 per month, and eventually ceased altogether. The current loan balance is $75,000.

21. In the July proceedings, the applicant was seeking spousal maintenance and her Honour ordered the second respondent to pay it but then also made the order for each party to contribute one third of the expert’s expenses. In respect of the applicant’s position before her Honour, the following appears in the Reasons for Judgment:

    Finally, the orders proposed by the wife included an order that the husband, the wife and the third party do all acts and things necessary to obtain a valuation of the business operated by the third party with the costs of such valuation to be shared equally by all three parties. This proposed order is in accordance with the order sought by the third party in its response to initiating application filed 11 June 2014.  In those circumstances and in order for the matter to progress I propose to make that order at this time notwithstanding that the third party was excused from attendance at the hearing before me. (my underlining emphasis)

22. Two observations can be made. First, her Honour was sufficiently satisfied not to depart from the rules (to which I shall now turn) but secondly, the second respondent had not participated in that hearing (having been excused) and does not dispute the obligation.

23. Notwithstanding my concern about just what jurisdiction and power is to be exercised at trial (counsel for the applicant said that it may be a contractual dispute to heard with reliance on the accrued power), the second respondent has continued to participate in the proceedings and would therefore be bound by at least any procedural orders.

24. Rule 15.47 of the Family Law Rules 2004 provides consistently with the July 2014 orders, that parties are equally liable to pay a single expert witness's reasonable fees and expenses incurred in preparing a report.

25. Rule 1.11 permits the Court to vary or set aside an order made in the exercise of the powers in the rules. Thus, I could adopt the position of the applicant even though there had already been a determination.

26. Further, the rules provide that if the Court has any doubt or difficulty because of the absence of a legislative provision relating to practice or procedure, it may make such order as it considers necessary and that includes (rule 1.10) the making of an order with the imposition of terms, conditions and consequential orders. Thus, an “up front” payment could be ordered to be adjusted at trial.

27. Here, I have a statement from the applicant that she has no ability to pay anything yet she has (apparently) a finance debt for a car. I have no evidence at all from the second respondent about its financial position. On the previous occasion, it was said that the second respondent will argue that it did not have to pay consideration to the first respondent when it took the business because of the financial position of the entity at that time. No doubt the balance sheet and company meeting minutes will all show that but I do not have that evidence. However, the second respondent is apparently willing to pay the relevant price after the expert’s report is completed less money that it had to contribute towards employee superannuation that the first respondent had not set aside. There is obviously a benefit in the other respondents having the report finalised so that they can achieve their objective of getting absolute control of the company yet they stand by the July order to contribute one third.

28. In the previous directions hearing, there was discussion about the second respondent paying all of these expenses with an adjustment at trial but that presupposes that there is a trial. It also presupposes that the applicant would have something to contribute at that time bearing in mind that the common ground seems to be that there are no other assets attachable or divisible as between the applicant and the first respondent. Thus, if there was no value attached to the shares, the second respondent would have little prospect of getting money back.

29. The basis on which the power in the rules should be exercised can be gleaned from the very purposes of the rules (rules 1.04 and 1.06) which include ensuring that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable. That can be achieved by various management tools such as setting realistic timetables and controlling the process.

30. The main determinant however is that just and equity is achieved. I am very conscious that there is a risk that an entity not connected otherwise to the primary people to the de facto relationship is being prevailed upon. I am also conscious that albeit disputed, the applicant is the sole director and shareholder of a trustee company (of which the first respondent is the sole beneficiary) for whom the 45 shares are held in escrow or on trust.  Thus, the extent of her knowledge of the way in which the first respondent disposed of the asset and her understanding of what she would get out of it, remain unclear and have to be determined.

31. Based on that unclear picture and the large imposition upon the second respondent, I would not be prepared to alter the July 2014 orders. As I indicated, it may be that the money so paid could not be recovered.

32. If that means that the case cannot proceed within the timetable now extant, all parties have a dilemma. The applicant will not be able to rectify what she sees as a wrong perpetrated by the first respondent and the other respondents will be stuck with the minor shareholder and future potential action.

33. Accordingly I find altering the orders of July would not necessarily achieve a just outcome. The applicant’s application fails.

I certify that the preceding Thirty Three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 21 October 2015.

Associate:

Date:  21 October 2014